Facing the Big-Brand Juggernaut: How to Compete Against the Big Guys by Laurence R Bernstein

white paper Facing the Big-Brand Juggernaut: How to Compete Against the Big Guys

Overview With the banners of somewhere around 492 hotel chains emblazoning tens of thousands of hotels, it is no wonder that many independent owners and operators are convinced they hardly stand a chance. They’re wrong.

ere are a few numbers that should strike terror in the

hearts of all true hotel marketers…and more so in the hearts (do they have them?*) of hotel investors:

492: the number of hotel chains according to Hotelnet 442: the number of hotels Starwood will be opening under

their banners in the next 3 years, according to the Starwood website 200: the number of hotels Marriott will be opening in the next three years, according to eturbonews And a few names that might stir

branded by hotel brands included

some terror in the hearts of some

in the above numbers. Sadly, no-

(probably mostly the owners at

body has the time or interest to

this stage): Virgin (for other rea-

calculate this number, possibly

sons), AC by Marriott, Tommie,

because by the time they would

Vib (really?), Canopy, OE

have added up all the hotels in all

Collection, Graduate, Moxy,

the chains, the chains would have

Venu, Jen, Radisson Red,

added new hotels, debranded old

Pendry, RL – these are all new

hotels, switched brands, or start-

brands in 2014! (Hotel Chatter,

ed entirely new brands. It would

October 2014). Add to this:

be, as they say, a truly sisyphusi-

Curio, 1 Hotels and Resorts,

an task.

Baccarat. There are more, but

All of which goes to prove that

the point is well made.

the brand juggernaut is indeed

Not known and unknowable:

something to be scared of if

the number of hotel properties

you’re an independent.

* Just kidding Excerpted from the article by Protean Managing Partner Laurence Bernstein first published in Hotelexecutive.com (http://hotelexecutive.com)

But, the juggernaut can be beat-

Whether by accident, or by under-

en! In the next little while we’ll

lying design all along, this ena-

look at the reasons behind bran-

bled Holiday Inns to sell more

The underlying

domania and how unbranded

franchises, as the case could be

hotels can, if they are prepared to

made that the new brands did not

work hard and believe, beat bran-

encroach on the old brands and

dzilla at its own game.

reasons for the

Why the brand proliferation?

proliferation of

The primary reasons for brand

brands have

proliferation concern mostly the

left them vulnerable to successful

owners of hotels and operators of brands, and only in a peripheral sort of way, the consumer.

therefore did not offend geographical restrictions in franchise agreements. This is the key to the post millennial brand explosion. As individual brands grow the potential to sell more franchises or build more properties, decreases; this limits

Being in the business of

the growth of the corporation, the

brands

profit potential, the share price

It might have been Holiday Inns

and all that goes with it. The an-

pendents.

in the late 80s that started this

swer is to have more brands – a

This key

process when they rebranded

portfolio – to sell, so that the ho-

their properties into segment-

tel company can have many

layered properties: Holiday Inn,

brands in any location. The more

Holiday Inn Express and Holiday

the merrier. As the CMO offices of

Inn Crowne Plaza. The overt logic

these hotel companies were filling

cusing on two

made sense – by this time there

up with package goods marketers

factors: availa-

were so many Holiday Inns with

the strategy became endemic: as

bility and rele-

such a wide range of quality that

with any package good product,

it did not make sense to have the

consumers choose from a variety

same brand across all the build-

of branded options on the store

ings. The travelling public needed

shelf – some of the brands owned

some sort of direction-sign to let

by the same manufacturer. The

them know what to expect or,

trick is on shelf visibility, and as

more hopefully, to allow them to

retailers (selfishly) would only

choose the quality level (and

permit a limited amount of shelf

therefore price – remember those

space for any given brand, the

good old days when a better

answer to growing share was add

quality hotel cost more than a

more brands. It worked for

lesser quality property?).

Procter and Gamble and, let’s face

competition by smart inde-

advantage, can be leveraged by fo-

vance.

Page 2

facts, it’s working for hotel com-

will happen.

panies. And in the same way that P&G ceased to be a manufacturer of household products and became a marketer of brands, hotel

Investing in ho-

companies changed from being in

the business of selling hotel

tels is seen as

rooms to weary travelers, and

an attractive

found themselves in the business

real estate play by many investors, and it is the ac-

cepted wis-

of selling brands to investors.

The market demand Of course this would only work if there were enough developers and investors building hotels, and enough of them wanted to brand the asset. Both of these condi-

dom that hav-

tions were met: investing in ho-

ing a brand

tels is seen as an attractive real

over the door

estate play by many investors, and it is the accepted wisdom

makes the in-

that having a brand over the door

vestment less

makes the investment less risky.

risky.

The demand for brands grew rapidly and, it would appear, is still

growing. At play is a virtuous circle that predicts the infinite growth of ho-

Traveler apathy It’s much easier to choose a branded hotel than an independent, and if one travels frequently

it just doesn’t make a lot of sense to “explore” hotel options in every city, every time. Loyalty program membership (if the guest remembers which loyalty clubs they are

members of and which hotel brands belong in each loyalty program) makes it even easier to choose without having to think about it – and as human beings

we resist thinking as much as possible (no kidding!)

tel brands: as any hotel company

The weak underbelly of the

acquires more brands and hotels,

beast

they acquire more loyalty pro-

We have seen that brands have a

gram members which is seen as

lot going for them, including, but

assurance of success in new ho-

to a somewhat lesser extent, the

tels, which drives demand for

fact that guests find them a con-

brands, which drives the need for

venient way of navigating the

new brands. If this happy merry-

very complicated world of hotel

go-round stops, who knows what

choice. But this convenience is Page 3

Independent hotels can take advantage of the weak underbelly of the

major chains,

driven by apathy, not desire (or,

people you include in the average,

possibly, a desire for apathy). In

the less likely you are to actually

some cases – in many cases –

hit on the needs of any single in-

people just want to take the path

dividual.

of least resistance; and as long as

In other words, because an inde-

that path provides a decent expe-

pendent is small, there is a great-

rience, they see little reason to

er opportunity to understand the

change their approach. In this re-

guest at a meaningful level, and

gard it’s important to admit that

build experiences that delight

for the most part, most brands

them in unique, memorable ways.

are pretty good most of the time.

This fundamental advantage can

As you face the brand juggernaut

be applied using the basics of

do not for a moment think you

brand choice theory.

will beat them because they are “bad” or provide inferior product. They don’t, and most branded hotels are indeed formidable oppo-

Aside from everything else, there are really only two factors that an

independent hotel needs to consider when competing with chain

and success-

nents.

fully compete

If the weak underbelly is not the

These two factors are the most

quality of the product, what is it?

important components of brand

The answer lies absolutely in un-

choice: the more available and

derstanding customers and acting

the more relevant something is,

on this understanding in a mean-

the more likely a consumer is to

ingful way. Brands understand

buy it as opposed to another less

the market (consumers) in broad

available, or less relevant, alter-

aggregated terms. They average

native. (If you don’t believe me,

behavior and use this as a way of

read “How Brands Grow” by Byron

building experiences. This is nec-

Sharp). This means, to be clear,

essary because if they looked at

that if you do everything well, and

guests as individuals, the funda-

you are more available and more

mental idea of a chain

meaningfully relevant, you will

(consistent, predictable, product

win. But it also means that even if

delivered in multiple outlets)

you do everything well, if you are

would fall apart: other than an al-

not more accessible and meaning-

most universal tendency to apa-

fully relevant, you will probably

thy (see above) people are differ-

lose the competitive battle.

with branded hotels.

hotels: availability and relevance.

ent from one another; the more Page 4

It is not where you are located, but how

you describe and position where you are located relative to where the guests need to be. Your deeper understanding of the guests will enable you to do this far more effectively than your chain

competition.

Beating the Juggernaut 1: Be

pendents have an advantage over

available, physically and men-

chains: as an independent you

tally.

can know more accurately what it

Physical availability – the ability

is your guests are looking for in

to actually buy and use the prod-

the region (i.e. why they are stay-

uct – is determined by distribu-

ing in the location) and more ac-

tion. In the case of the hotel busi-

curately frame the location to be

ness this includes the ability to

seen to meet those needs. It is

book the room (i.e. make the

not where you are located, but

purchase) easily, as well as the

how you describe and position

ability to stay in the hotel con-

where you are located relative to

veniently. There was a time when

where the guests need to be. Your

chains beat independents hands

deeper understanding of the

down on accessibility – they were

guests will enable you to do this

easier to book (they had 1-800

far more effectively than your

number reservation systems) and

chain competition.

they were more likely to be where

Mental availability is the ability to

more travelers wanted to go.

access information about the

This has changed. Independent

brand in the mind. The brand that

hotels can be accessed online as

comes to mind first (i.e. the most

easily as chain properties, alt-

easily mentally accessible which

hough they suffer a disadvantage

means the most salient brand)

in position – the independent

has a huge advantage over the

cannot afford to buy placement in

brand that comes to mind last…

search engines or OTA listings as

or, heaven forbid, never comes to

much as chains. But, with smart

mind at all.

SEO, an independent can be

At first blush this is an advantage

nearly as accessible, and with

held by chains that an independ-

smart online merchandising, an

ent cannot nullify – quite simply,

independent can be more visually

people are more likely to immedi-

intrusive and, hence, effectively

ately think that there is a Hilton in

more available.

the city they are intending to vis-

There is not much a hotel can do

it, than to immediately think of

about where it is located, physi-

your hotel (which they may never

cally. But there is a lot the hotel

have heard of). As it relates to a

can do in the way it describes and

traveler who is unfamiliar with

presents its location. Here inde-

your hotel, there is, to be honest, Page 5

not much you can do. But there

delivering relevant, memorable

are some thing that can minimize

experiences, and need to go back

this disadvantage.

to square one (understand your

this is an ad-

The first is to align with an inde-

customer) and read the next sec-

vantage held

pendent referral group – these

tion carefully. Saliency is the re-

are becoming more effective and

sult of multiple connections in the

more specialized, with some

brain, so the more memorable,

an independ-

building powerful online presence

relevant experiences people asso-

ent cannot

and top of mind awareness. In-

ciate with your property, the more

creasingly, rather than think im-

triggers there are that will bring

mediately “There must be a Hil-

your hotel top of mind.

simply people

ton there,” travelers are thinking

Beating the Juggernaut 2: Be

are more likely

“There might be a Leading Hotel

relevant in meaningful, memo-

of the World there”. The im-

rable ways.

portant thing is to join a network

think that

Independent hotels have the ad-

that understands its role is to

vantage, as mentioned before, of

there is a Hil-

preempt chain mental availability.

being able to really understand

Another, of course, is to manage

their customers and how the hotel

effective social media activities

and destination fit into their lives

they are in-

that can, when well planned,

on a much more personal basis

tending to visit,

bring your property top of mind

than chain competitors. And,

to those most likely to travel to

equally importantly, they have

your region soon. There are many

the flexibility to do something

diately think of